USDA loans are similar to conventional loans. However, there are important differences you should be aware of, including how they go through foreclosure.
The U.S. Department of Agriculture requires lenders to follow specific loss mitigation rules before foreclosing on a USDA home. If you have a USDA loan and are struggling to make mortgage payments, there may be loss mitigation options available to you.
An attorney can work with you as you explore your loss mitigation options and help you negotiate with your mortgage lender to find the best solution for you and avoid foreclosure.
Joshua Denbeaux is an experienced New Jersey foreclosure attorney dedicated to fighting for homeowners’ rights. Contact Denbeaux Law today to learn more about foreclosure and how we may help you avoid it. .
What Is a USDA Loan?
USDA loans are offered by traditional mortgage lenders but are insured by the U.S. Department of Agriculture. They are structured to purchase primary residences in rural areas.
To qualify for a USDA loan, homeowners must purchase a primary residence in a qualifying rural area and meet the household income requirements.
USDA Loan Loss Mitigation
The USDA is focused on avoiding homeowner foreclosures. If you are facing foreclosure with a USDA loan, your lender should follow the USDA’s loss mitigation guidelines to try to help you avoid foreclosure.
The Department of Agriculture has strict guidelines for lenders on how they should proceed with homeowners who are behind on their USDA loan payments. If your lender isn’t complying with the USDA guidelines, that violation could help you defend your home from foreclosure.
With a USDA loan, lenders are expected to contact mortgagors after their mortgage payment is more than 20 days late. The USDA wants lenders to try to work with homeowners to bring them current on their mortgages.
If a homeowner’s financial situation has changed and they are no longer able to afford the mortgage, there are also loss mitigation options to help them avoid foreclosure. The USDA encourages pre-foreclosure sales of homes to avoid homeowners having to go through foreclosure.
The Department of Agriculture also asks lenders to review mortgagors’ financial situations to identify servicing actions that could aid borrowers.
Stopping a USDA Foreclosure
Your lender should offer you options to avoid foreclosure. With a USDA loan, there are a variety of different options that may be available to help you stop a foreclosure.
Loan modifications are the main option to stop foreclosure for USDA loans. With a loan modification, you can work with your lender to modify the terms of your mortgage to make it more affordable for you. Loan modifications usually change your mortgage interest rate or loan term to create lower monthly payments and make your USDA mortgage more affordable.
Pre-foreclosure sales or short sales are an option to avoid foreclosure. With a pre-foreclosure sale, you sell your house, typically for less than market value, to pay off your remaining mortgage balance. To be eligible for a pre-foreclosure sale with a USDA loan, borrowers must have failed to meet the requirements of an approved repayment plan or special forbearance agreement. USDA loans emphasize homeowners’ ability to stay in their homes. A sale will only be encouraged if borrowers cannot make payments to keep the home.
A deed in lieu of foreclosure is another option to avoid foreclosure if you cannot make mortgage payments to keep your home. A deed in lieu of foreclosure is an agreement between a homeowner and a lender where the homeowner gives the deed of their home to the mortgage lender to avoid foreclosure.
However, because the USDA is motivated to keep homeowners in their homes, it will often work with you to avoid short sales and deed-in-lieu agreements unless there are no other suitable options.
Work With a New Jersey Foreclosure Defense Attorney
There are a variety of options available to help you avoid or stop foreclosure with a USDA loan. Your lender should work with you to help you avoid foreclosure. But that doesn’t mean you should go it alone. While the USDA wants to help homeowners, not all lenders will follow the rules or have the same intentions.
A foreclosure attorney can help you explore your options to avoid foreclosure and determine the best option for you. Your attorney can also help you through negotiations with your lender to achieve the best possible outcome for your situation.
Contact Denbeaux Law today to learn more about your options to stop a USDA foreclosure and how we may be able to help you.
